Georges Penalver, chief strategy officer for ST, told the analysts community recently that ST is being constructed as two product-oriented business segments organization. The first block encompasses ST’s sensor, power and automotive products and is essentially ST’s successful analog business and its digital automotive business. The second block is ST’s embedded processing business and is the non-automotive digital business including microcontrollers and processors for digital consumer applications.
Focusing on the Embedded processing segment and ST’s manufacturing strategy, let’s look into some statements from the earnings call last month:
· The 1st segment i.e. Sensor, Power & Automotive represented 56% of net revenues and the 2nd segment (Embedded Processing Solutions) 44%
· Wireless saw a significant decrease due to ST-Ericsson and this will continue. LTE Modem development activity and biz has moved to Ericsson
· ST will not compete in the application processor market in smartphones
· Microcontrollers are a key driver in the Embedded Segment; the others are STB (set top boxes), TVs, digital ASICs, Imaging etc.
· ST will focus on 2 segments in Microcontrollers. The first one is wearable electronics (healthcare, automotive, gaming) where it caters to diverse and small size customers (requirement is for low power microcontrollers, sensors and connectivity). The second one is secure microcontrollers (which is more for smartphone applications (NFC), banking - both contact and contactless) catering to a smaller number of customers but for a likely high volume
· Digital biz will be in 300mm wafer fab in Crolles
· Manufacturing distribution in Crolles: 1/3rd each into MCU, CMOS image sensors and dig consumer products
· ST is betting big on FD-SOI tech. It has second source agreement with GlobalFoundries for selected customers for this techno. Here it is working aggressively on 2 fronts – 1st is communication infrastructure where low power dissipation is important along with strong performance. The other is portable equipment (outside smartphones, tablets)
Add to that the fact that the major semiconductor growth (last year and projected this year too) are the mobile consumer devices especially smartphones and tablets as well as the wireless communication sector.
Keeping the above in mind, it will be a big challenge for the company to support leading edge technologies in Crolles and that too with an allocation of a third of its capacity for digital consumer products – case of an expensive leading edge digital technology without targeting aggressive margins. So, how ST can keep its IDM model, especially on the leading digital edge with this kind of a product segment organization strategy, economically viable – that’d be interesting to watch.
What are your thoughts?